Langton Capital – 2015-08-21 – Kuoni, Sterling, interest rates, new openings & other:
A Day in the Life:Follow us on Twitter at either @langtoncapital or @brumbymark. So what odds would you get on Hull City going up and Chelsea going down in the same season? Probably quite a long price but, if it were the other side of 1,000 to one it might be worth putting a few quid down. I mean stranger things may never have happened but there’s always a first time, right? Right?? Anyway, it’s back up North for me and the weather’s turning autumnal. August is one of those months, buds and blooming plants one day and falling leaves the next. On to the news: The News:Pub, Restaurant & Drinks Producer News: • Jamie’s Italian to open in India this autumn. Reports suggest the group will open 2 units in Delhi with a roll out thereafter • UK sales of Prosecco rose 72% by value last year. Champagne, on the other hand, dipped by 1.2% according to IRI. IRI reports ‘Prosecco is a fashionable drink that provides a cheaper and excellent quality alternative to Champagne. It’s no wonder that it now outpaces champagne in value and volume and is being chosen above champagne at weddings. It’s quickly becoming the nation’s summer drink of choice.’ • Mintel has suggested that 17% of UK adults intend to reduce their consumption of alcohol over the next 12mths. • Mintel suggests 80% of UK adults currently drink alcohol, 72% imbibe at least once a week • Coca-Cola has bought a minority stake in organic juice maker Suja Life • Big Hospitality has reported that 15-strong Pizza operator Franca Manca has signed on a site in Wimbledon, London • Living Social has reported that diners will pay an average of £12.04 for a main course in the UK and Ireland • M+C reports US burger operator Five Guys is to accelerate its UK opening programme and is to open its 30th UK site next week • UK retail sales volumes +0.1% in July m-o-m per ONS. Reverses fall in June with sales growth strong in household goods. • UK retail sales are +4.2% y-o-y in July per ONS. Says average store prices fell by 3% year on year, driven by an 11% fall in petrol. Leisure Travel: • Kuoni H1, has achieved ‘organic growth above market’ and re re-positioning says ‘all tour operating activities sold faster than planned’ • Kuoni H1: Revenues +6.8% organically at 1.5bn CHF. Strong franc held back reported sales growth. Made 5.9m CHF net. • Kuoni H1: Says FY ‘operating earnings from continuing operations expected to be in the range of CHF 40 to CHF 50 million’. CEO Peter Meier reports ‘Kuoni Group’s organic growth above market in first half of 2015 vindicates the new strategic direction initiated at the beginning of the year and the focus on global B2B business areas. However, the strong Swiss franc had a significant negative impact on turnover due to the conversion into our presentation currency. The two divisions Global Travel Distribution (GTD) and VFS Global recorded strong growth. In the first six months of the year, VFS Global processed over 10 million visa applications for the first time. With the successful sale of all tour operating activities in June and August 2015, we achieved a key objective of the new strategic direction faster than planned.’ Finance & Markets: • Sterling down on slow retail sales numbers. Interest rate rise hopes in forex market put on hold • Global markets: All down again yesterday. Far East down in Fri trading. FTSE100 now at 7mth low, longest falling streak since 2011. Market down now for 8th straight session. • China factory activity slows at fastest rate in 6yrs. Markit PMI of 47.1 (47.8 in July) where a no < 50 implies contraction • Oil price down overnight, Brent now at $46.10 per barrel • US seasonally adjusted initial jobless claims rose to 277k in week to 15 Aug. May dampen interest rate rise talk • ECB member Ewald Nowotny says inflation is not likely to resurface in Eurozone any time soon. ECB looking for1.5% in 2016 • UK car production down 11.2% in July v last year per SMMT. Says it is largely down to changes in holiday patterns • Mortgage lending in UK in July highest for 7yrs. Some £22bn lent in the month • Number of homes being built in England has risen sharply over last 12mths per HMG numbers. Completions +22% in Q2 • Greek PM Alexis Tsipras yesterday resigned in order to call an early election on 20 Sept. Leisure – The Week AheadIt’s a big week for gaming next week with interim results from Paddy Power (26th), Playtech (27th), 888 and B-win (both 28th). Last year’s World Cup will likely skew first half numbers from many of the betting companies and recent tax changes will have impacted cost bases. The Restaurant Group produces its interim results on the 28th. The group’s shares have been strong over the past month or so, rising from c660p to c710p, though the recent downturn in the markets has seen the shares off their peak. Last week saw the Coffer Peach Tracker report that restaurants have had another strong period of growth in June, with LfLs up 4.3% in restaurants and 4.9% outside of London. RTN has a strong provincial presence and so investors will be looking for the group to have performed well recently. PPHE Hotel Group, the operator of full service upscale hotels, reports its interim results on the 27th. The group updated on trading on the 13th august, in which it predicts revenue is up 12% and EBITDA up 10% for the first half of the year. The group has also recently promoted several people to the board this month. Will Brumby – will.brumby@langtoncapital.co.uk Retail Roundup from Nick Bubb:
Trade Press: News Flow Next Week: The only scheduled company news next week, as we run up to the Bank Holiday weekend, is the Signet Q2 figures on Thursday, but, as we have been waiting all week for some news from Poundland, with no joy, we assume that the CMA will issue its provisional findings on their proposed acquisition of the 99p Stores chain at some point next week. As the end of the month is coming up fast now, the CBI Distributive Trades survey for “August” is out on Wednesday and the GFK Consumer Confidence survey for August is out first thing on Friday. And the latest Grocery market share figures (for the 4 and 12 weeks to August 16th) from Kantar and Nielsen come out on Tuesday and Friday respectively. Nick Bubb – nicholas_bubb@hotmail.com Thursday Wrap:This was produced for distribution yesterday afternoon: So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following: China: • Trying to establish a glide path from GDP growth of 10% via 7% to perhaps 4% for the longer term (20yrs or so) is tricky to say the least. • Because, like a pilot landing a plane, if you end up on the runway but spend a period of time ten feet below it, you’ll be in a bit of a mess. • Hence China has to try to avoid growth going from 7% to minus 4% to plus 5% to minus 2% etc. etc. and that’s easier said than done • I mean ask Mr Greenspan • He tried to gently deflate the dot.com asset boom via 6 rate rises in 1999 and 2000 and this led to the NASDAQ collapsing etc. etc. • Markets can read the history books & have been spooked accordingly. Inflation, deflation, no-flation… • Both the US Fed and the Bank of England appear to be preparing their respective audiences for interest rate rises, perhaps in September/October in the US and in the New Year in the UK. • And, as various members of the MPC have suggested, that’s as it should be. • Higher rates are a sign of a healthier economy but, when fighting inflation is at the top of the agenda for central banks, it is likely to be some kind of concern re rising prices that prompts action. • And, when it comes to rising prices, there’s little sign of any action on the horizon. • China seems to be slowing and commodity prices, metals, oil and foodstuffs in particular, are extremely lower. • And in some cases, oil, for example, they may be going lower still suggesting that deflation could still be more of a near term problem than inflation. • Of course the Living Wage may put paid to that – and therein lies a problem. • Because there’s a difference between inflation (such as there is any) caused by commodity price increases (this should be transitory) and inflation caused or perpetuated by wage increases (because this is ‘baked in’) • Hence there is real potential for the Bank and its political masters to deal with deflation in such a way as to cause inflation, and the latter of the least pleasant sort UK interest rates: • Markit is suggesting that 78% of UK households expect rates to go up at some point in the next 12mths • What it doesn’t say is how many said they were actually doing anything about it • When rates rise they are still likely to impact spending as there is little sign that spending is being held back in order to provide for a rainy day • The grey market could benefit but, overall, higher interest rates tend to be associated with lower spending levels overall Random information, hopefully not all of it useless (re most leisure operators etc.): • All markets down yesterday, not looking a lot better today. • Note that the gold price is blipping up. • Other commodities extremely low, copper etc. at 6yr lows, soybean prices lost all of their recent gains, sugar flat out unconscious. • Interesting but true, iron miner Century Iron Mines (of Canada) has moved from mining to dining. It is to export eggs from Australia to China – here • Interesting also to see milk prices beginning to firm up in the Southern Hemisphere – here • Crude inventories said to be higher than anticipated, traders say low prices could persist. Such bold comments would often presage a rise in prices – but they may not this time, particularly if China slows further. • Note that WH Smith says its travel business has benefitted from increased footfall. Interestingly its high street operation has also performed well, it’s even selling more books! • Looks like Greece III is being put to bed; any bets on when Greece IV is likely to kick off? |
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